The US Treasury bailout: Argentina’s opaque last-minute rescue

A “historical” agreement that reveals economic desperation

The United States’ intervention to support Argentina’s peso has been described as “historical”—and it is. But this historical nature tells us as much about the strength of the bilateral relationship as it does about the depth of Argentina’s crisis. Argentina has effectively moved its lender-of-last-resort function even further from traditional mechanisms: from the IMF to the US Treasury itself.1

This represents an extraordinary shift. The US Treasury last purchased foreign currency 25 years ago—for the euro, in coordination with major central banks. Direct intervention in an emerging market currency is unprecedented in modern times. Even more so when they carry the intention to affect the democratic outcome of another country. That such measures were deemed necessary speaks loudly about the severity of Argentina’s situation.

Reaching out to a new lender-of-last-resort has implications. Unlike the IMF, which operates with established guidelines and conditions, the US Treasury’s support depends far more on partisan political calculations. Treasury Secretary Scott Bessent has explicitly framed this as geopolitical support for President Milei, stating Argentina is a “beacon” for South America. President Trump himself made the partisan nature crystal clear: “If he loses, we are not going to be generous with Argentina.”

This creates fundamental uncertainty. Will support continue under a different US administration? What happens if Milei’s political fortunes change? What happens if Bessent steps down from his position? The answer to Argentina’s economic stability now hinges more on Washington politics than on compliance with established international financial standards.

An agreement conducted in the shadows

Perhaps most striking is how little Argentines know about the agreement that commits their country’s future. The information Argentines receive about this critical arrangement comes primarily from US officials and international media, not from their own government.

The Argentine Central Bank issued only a perfunctory statement confirming the agreement, noting it “establishes the terms and conditions for bilateral currency swap operations” but providing no technical details whatsoever. Economy Minister Luis Caputo has remained equally vague, offering no specifics about terms, rates, conditions, drawdown mechanics, or repayment schedules. The historical agreement (as categorized by the government) did not warrant any sort of explanation to the public.

The US Treasury has been similarly opaque. As of weeks after the announcement, the Treasury had published no details about the terms and had not issued its own formal statement about the arrangement. Key questions remain unanswered:

• What interest rates is Argentina paying on drawn amounts (if any)?
• What are the repayment terms and timeline?
• Are there policy conditions attached to the facility?
• How much of the facility has actually been activated?
• What collateral or guarantees has Argentina provided?

This level of opacity is remarkable for an agreement that doesn’t involve national security considerations. The Argentine public is being asked to trust that their government has negotiated favorable terms, without any evidence to support that trust. Recently, Bessent stated that the US had made profits from this agreement. Governments are typically opposed to financial dealings with inside information. It seems such opposition does not apply to them.

What we can piece together from speculation

The US Treasury intervened directly in currency markets. Bessent confirmed that the Treasury purchased pesos in both the spot market and the “blue chip swap” market, though specific amounts were not disclosed. Reports indicate hundreds of millions of dollars in interventions, with major US banks like Citigroup and Banco Santander acting as intermediaries.

Argentina activated the swap facility. Despite initial presentations suggesting the swap was merely a backstop that wouldn’t need activation, Bessent recently confirmed that Argentina has drawn on the facility. He stated the US has “made money” on the arrangement and characterized the amount drawn as “small” relative to the $20 billion total—but again, no precise figures were provided.

The mechanics appear to be circular. The most likely sequence:

1. The US Treasury sold dollars (bought pesos) to support the exchange rate;
2. The Argentine Central Bank then “activated” the swap line with the US Treasury;
3. The BCRA used dollars from the swap to sell back to Bessent;
4. Bessent can now claim that the US made a profit on the transaction.
5. Argentina (taxpayers) now owes the US the amount activated in the swap.

The result: temporary stability at the cost of increased, opaque debt. Argentina avoided an immediate currency crisis before the October 26 midterm elections, but at what price? The country has incurred new debt obligations to the US Treasury under undisclosed terms. The debt is real, even if its precise magnitude and conditions remain secret.

Buying time, not solutions

Today’s relative calm in the foreign exchange market should not be mistaken for normal conditions or a permanent solution. Argentina has bought time, not a permanent solution. Hopefully, the government will make good use of this borrowed time and void the self-deception that all is good because they are the “Messi” of finances and economics.

The government blames “kuka risk” (fear of a Kirchnerist return to power) for peso volatility. While this political risk certainly exacerbates market tensions, it’s misplaced to attribute all exchange rate pressure to this factor. The exchange rate tensions predate the “kuka risk” by months.

Consider the timeline:

• July 2025: The government began facing increased exchange rate tensions after dismantling the Fiscal Liquidity Bills (LEFI). Analysts described this as the “original mistake” requiring “patch after patch” to address. The wholesale dollar reached an all-time peak of 1,380 pesos in late July. The government raised interest rates to 69% to contain the exchange rate (while annual inflation was running at only 36.6%).
• August 2025: The Central Bank and Treasury coordinated emergency measures to absorb 6 trillion pesos (approximately $4.5 billion) that threatened to pressure the exchange rate. The peso had been under sustained downward pressure as the government burned through reserves to defend it.
• September 2025: Before the Buenos Aires election that sparked the “kuka risk” narrative, markets were already worried about the sustainability of the crawling peg, reserve depletion, and the overvalued peso. Note that the government has revised its exchange rate policy twice since its inception, due to pressures against the peso. The IMF’s June review found that Argentina had breached agreed limits on domestic asset purchases. The current account deficit had returned in the first half of 2025, creating structural downward pressure on the peso.

The “kuka risk” made a bad situation worse, certainly. But the fundamental problem—an overvalued peso, depleted reserves, mounting debt obligations, and an unsustainable exchange rate regime—existed well before political uncertainty was added to the mix.

The road ahead

Argentina now faces several uncomfortable realities:

The exchange rate regime remains unsustainable in the mid-term. Analysts tend to agree that Argentina needs to widen, or recalibrate, the currency bands. Many call for a free float regime. The current system requires constant intervention and reserve depletion. Additionally, the (upper) band is non-credible given the lack of reserves at the central bank. And, since the upper bound moves at 1% (lower than the inflation rate), in real terms, the band puts increasing appreciation pressure on the exchange rate.

The US support is conditional and time-limited. It’s explicitly tied to Milei’s political success and policy direction. This creates a precarious dependency on factors outside Argentina’s control. Milei’s party was one that last mid-term elections, but just a couple of months before, he faced a blowout defeat in the Buenos Aires province elections. Nothing guarantees the next election is going to fall on Milei’s side.

Debt obligations have increased under opaque terms. Argentina has mortgaged future resources under conditions its own citizens cannot evaluate. The lack of transparency makes it impossible to assess whether the terms are reasonable or onerous.

The US intervention may have helped Milei navigate the October elections, but it hasn’t solved Argentina’s underlying economic challenges. The calm we see today is artificial, maintained through intervention and obscured by opacity.

What Argentina needs is transparent policy, genuine structural reforms, and not secretive bailouts.

The “historical” nature of this agreement is indeed significant. But history may ultimately judge it as another chapter in Argentina’s long story of temporary fixes, mounting debt, and deferred reckoning with economic reality.

This material is a result of a collaboration between Professor Nicolas Cachanosky and the European Center for Austrian Economics Foundation (ECAEF), focused on publishing a series of articles on economic and fiscal topics. It emphasizes our commitment to independent thought, academic freedom, and critical inquiry. The original was published here: https://economicorder.substack.com/p/the-us-treasury-bailout-argentinas